Nearly 2/3 of NAB’s mortgage flows come from brokers

According to the major bank, 64.9 per cent of the $39 billion in new Australian home lending was lodged by brokers in 1H24, up nearly 6 per cent from March 2023 (when it was 61.3 per cent) and nearly 10 percentage points higher than the 55.1 per cent in 1H22.

In dollar values, this equates to $25.3 billion in new lending written by NAB in the six months ended March 2024.

Given the increase in broker-originated flows, brokers are now responsible for 51.4 per cent of its total home lending portfolio in Australia.

According to the major lender, part of the attraction for brokers has been the bank’s technology platform and ability to turn loans around faster in recent months, with NAB expanding eligibility for its Simple Home Loans platform in the broker channel.

As such, nearly a quarter (24 per cent) of broker home loans were approved via Simple Home Loans in 1H24, up from 15 per cent in 2H23.

The platform has reportedly saved 35 minutes of banker ‘touch time’ through further process simplification and reduced banker ‘touch time’ by 68 per cent since FY19.

Around 95 per cent of retail proprietary flow is reportedly eligible through Simple Home Loans with the legacy technology system expected to be decommissioned for FY26.

In its financial results, the bank said it “remained focused on providing simpler, more digital banking experiences”.

“Our digital home lending platform continues to deliver faster turnaround times and better banker productivity. Rollout is progressing well across the broker channel with almost a quarter of broker home loans now submitted via the platform (up from 15 per cent in 2H23),” it said.

Will margin pressures result in a skew to proprietary?

However, the new group chief executive Andrew Irvine has suggested that competitive dynamics in the Australian home lending market have been challenging.

Indeed, the bank’s half-year financial results revealed that the returns on broker loans were “below the cost of capital” due to “price premiums” in the channel. However, this was not the case in the direct channel, where returns were above the cost of capital.

Speaking to our sister brand Mortgage Business about how this will impact the bank’s broker strategy, Irvine said: “One of the things that we do in the broker channel is to have a price premium versus competitors. And so, routinely, we would price a five to seven price premium to other banks.

“We do that because we have a superior service proposition. And what we find is that when customers are buying when they’re in the purchase market, they’re comfortable with that premium because they want to have certainty on settlement and low stress.

“When it’s a refi-heavy market, I think customers are a little bit more price-sensitive. And so what I think that does is allow us to moderate volume in that channel. And you’re going to continue to see us do that while returns are south of the cost of capital.”

Indeed, the NAB group CEO said the bank had chosen to adopt a “selective” approach to growth over the 12 months to March 2024, with balances rising 3.7 per cent (representing 0.8 times system growth levels) leading to “a deliberate skew” to business and personal banking, where “returns are stronger”.

When asked by Mortgage Business whether the bank would cease passing on any cash rate cuts as a result of NIM pressures, Irvine said: “We price our mortgage book on the assumption that we will pass on the cash rate changes, both on the upside and the downside.”

Overall, NAB saw its Australian home loan balances rise by $11 billion to $344 billion (year on year), spread evenly between the two halves.

The NAB CEO added that he believed business lending growth at the bank had been “astonishing”, particularly in the month of March.

[Related: Borrowers cutting back on travel to pay mortgages: NAB]